ACCA Applied Knowledge · Management Accounting · Behavioural aspects of budgeting
A company's managers are invited to take part in preparing the budgets for their own departments, and their proposals are discussed with senior management before approval. Which term describes this approach to budget setting?
This is participative budgeting, also called bottom-up budgeting. Managers who will be held responsible for a budget help prepare it, then agree it with senior management. This differs from imposed budgeting, where top management sets the figures without manager involvement.
- AParticipative budgetingCorrect
- BImposed budgeting
- CZero-based budgeting
- DIncremental budgeting
Explanation
Participative (bottom-up) budgeting involves the managers who will be responsible for the budget in preparing it. Imposed budgeting is set by senior management with no input from managers. Zero-based and incremental describe how the figures are built, not who is involved.
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